Danshui Plant No.2 Essay

Background Danshui was a contract manufacturer create electronic products in southern China. There were many manufacturers like Danshui in China assembling parts for the companies wishing to alleviate trade union movement cost. Apple contracted with Danshui to assemble 2.4 jillion iPhones in Plant No.2 with the expected high pauperization of this product in 2010. As a net center, Plant No.2 was credited for each iPhone produced and shipped. The shape of assembling was complex and required almost entirely found on handwork for more than 100 components. Danshui was convinced(p) of its workers to adapt the new tasks and extra workers could be chartered and trained as needed. The iPhone 4 was the most successful product of Apple as more than 1.7 gazillion units were sold in the first 3 years they were launched. However, the comprise was operating at a bolshy beca wasting disease of the underproduction.Consequently, the controller of this plant considered preparing the new b udget demo use a flexible budget establishment to identify what went wrong in their operations that cave in to the performance problems. Problems and issues The plant has 2 big problems in terms of budgeting schema and labor military force. Firstly, they were in invidious performance by using standard budgeting corpse. They were ineffectual to meet the Apple contract, which was shortage 10% from the 200,000 targeted units, resulting in the loss of $672,000 rather than the profit of $100,000. Actually, the plant was using the standard be system to label their performance, barely it was not appropriate because the comparative quantities were different (180,000 and 200,000 units). That doer the total standard costs would be magnified compared to the total actual costs. Consequently, the activities under the standard costing system were all overstated efficiency, leading to the unfavor adequate to(p) net income.Secondly, the lack of qualified labor force also contributed t o this problem. As the assembly of iPhone 4 was highly complex, this would be higher chances of errors as the assembly process was hand take by different workers with different skills and working styles. This ordain indirectly cause a lot wastes in term of cost and time due to the wateriness and the lack of skill of the workers. The burden of the supervisors must be increased as they must learn forwards guiding the workers, who were almost semiskilled.Although the plant had raised the payment to 30%, they still could not increase the publication of labor force needed, which also contributed to the underproduction. On the other(a) hand, as the production line was based on handwork, the damage of 1000 take memories in foundation was unavoidable. Thus, the actual output must be 181,000 units rather of 180,000 units in their report.The replacement of the wastage had increased the cost that had led to the unfavorable sport of $389,000. When the reckless jobs had been done, the workers must use the new tools and supplies, resulting in the increase of the production costs and cause an unfavorable performance. Recommendations For the short term, I cheer Danshui to change from using the standard costing system to the flexible budget system for performance military rank purpose. By using the flexible budget ordain help them to compare results with adjustable budget and the divergence analysis go away be more accurate. This system also proves the unfavorable performance caused by the variance from variable costs of $1,041,200, which can analyze and evaluate the weaknesses in controlling the variable cost which is flash memories, assembly and packaging expenses. For the long term period, they ache to overcome the disadvantages from the labor forces. First of all, the plant should emend their salary policy.I recommend that they should motivate workers by setting a basic salary and crack bonus if they complete their jobs well. Secondly, the plant should pr ovide skipper training for labors. Through training, the labors can learn how to manage with care on the parts to avoid the wastage that will happen. This solution also assists managers to place the correct labor at the correct assembly parts to bowdlerize the labor hours but still save the materials. Thirdly, the plant could hire more skilled supervisors who will able to response to the problems arises and know how to motivate the labor to carry out the goal.